Which of the following is an example of a variable cost?

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Question: Which of the following is an example of a variable cost?

Options:

Correct Answer: Direct Materials

Solution:

Direct materials costs vary directly with the level of production.

Which of the following is an example of a variable cost?

Which of the following is an example of a variable cost?

Step 1: Understand what a variable cost is. A variable cost is a cost that changes depending on how much you produce.
Step 2: Identify direct materials costs. These are the costs of the raw materials used to make a product.
Step 3: Recognize that as production increases, you need more raw materials, which means direct materials costs will increase.
Step 4: Conclude that since direct materials costs change with the level of production, they are an example of a variable cost.

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